Gasoline vs. Groceries

Ohio fuel retailers win temporary tax exemption

COLUMBUS, Ohio -- Grocers and companies that sell gasoline both fought for an exemption from the state's new business tax on sales, arguing they would suffer because of thin profit margins. Gasoline won by reasoning the tax could be paid multiple times from the refinery to the pump, reported the Associated Press.

Grocers are now considering their options, including a legal challenge on constitutional grounds.

It's ironic that the legislators are more sensitive to the cost of what people put in their cars than what they put in [image-nocss] their bodies, Jason Wetzel, vice president of governmental relations for the Ohio Grocers Association.

The tax debate is part of sweeping changes to Ohio's tax system contained in the two-year, $51 billion state budget up for final approval in the House and Senate last week.

The proposal by Governor Bob Taft replaces the current 8.5% business tax on profits, criticized as too high and full of corporate giveaways, with a low tax of 0.26% on sales by a broader variety of businesses.

Under the approved plan, the petroleum industry gets two years to come up with a plan for how they should be taxed under the new system. The industry argued that gasoline is already subject to numerous state and federal taxes, including a new 2-cent gasoline tax taking effect July 1.

95% of the price of the product is already in it by the time you reach the street, said Roger Dreyer, president of the Ohio Petroleum Marketers & Convenience Store Association. If you figure the tax on our gross sales, some of our people will have to borrow money to pay the tax.

Lawmakers tried to hold the line on exemptions to the new tax, saying such so-called carveouts were one of the things that limited the effectiveness of the current business tax. For example, they also rejected auto dealers' arguments that, like grocers, the new tax hurts their world of high sales volume but low profit margins.

State Senate President Bill Harris (R) defended the petroleum exemption, pointing out it is only for two years. He said the industry also will give up part of a discount they receive for collecting and paying the state gasoline tax. The thing that we've attempted to do is be very restricted on what the carveouts are and only do those that we felt ensured that we've protected Ohio jobs, Harris said.

But State Representative Dale Miller (D) argued it was inconsistent to tax grocers and not the petroleum industry. If a lawsuit is filed by a grocer, it would focus on a constitutional provision against taxing food, said Wetzel of the grocers' association.

People mistake the massive profits of big oil companies with the thin margins of small businesses, said James Patneau, president of Medina, Ohio-based Free Enterprises, a 65-employee fuel wholesaler and retailer.

There's very few things that the state of Ohio is going to do to hurt the large major oil companies, Patneau said. We were looking for something that would give us a chance to continue in business.